Britain says auto aid approved, welcomes bids

New cars are parked at Toyota's Burnaston plant near Derby, central England February 18, 2009. Britain has received clearance from the European Commission to go ahead with its 2.3 billion pound ($3.18 billion) aid package to its ailing car industry and said it now welcomed...
REUTERS/Darren Staples

By John Bowker and Nicholas Vincour| LONDON

LONDON Britain has received clearance from the European Commission to go ahead with its 2.3 billion pound ($3.18 billion) aid package to its ailing car industry and said it now welcomed applications for funds from manufacturers.

Business Minister Ian Pearson said in a statement the government had laid out the criteria against which applications will be judged, and hoped the scheme would support struggling companies as quickly as possible.

The government also announced a separate 27 million pounds grant to Jaguar Land Rover to help it build a new, greener vehicle.

However, there was still some scepticism among industry members about the timing and availability of the cash.

Britain announced it would guarantee up to 2.3 billion pounds in loans to its car industry in January. New car sales have collapsed in the UK and around the world in recent months due to a slump in consumer demand and the unavailability of loans from banks.

The decline has already caused thousands of job losses in the UK, including 1,200 at Nissan and 850 at BMW (Mini) since the turn of the year while the British arm of Toyota Motor Corp said it was cutting staff pay and working hours by 10 percent on Wednesday.

Minister Pearson met representatives from manufacturers and suppliers at a meeting near parliament earlier on Wednesday.

"Today's event was an important opportunity for companies and banks to understand how to access the scheme. We have already received a number of expressions of interest, and we look forward to other companies coming forward shortly," he said.

UNREALISTIC

The government's department for Business, Enterprise and Regulatory Reform (BERR) confirmed on its website that the scheme was available to companies in the UK automotive sector and automotive sector supply chain, but meeting attendees said there were still clear obstacles to funding.

Erik Eberhardson, head of the management buyout team at struggling Russian owned van maker LDV, said a 10-day target to deliver funding was unrealistic.

"They have been told there is an ambitious target, which I think is good... for 10 days.

But realistically the civil servants tell us that it will take one to three months, and that it is probably not going to serve the purposes of most companies," he told BBC radio.

A consultant to the industry who was present at the meeting said the conditions were too dependent on specific projects.

"There is a certain amount of cynicism by some suppliers who want to know exactly how the money will be distributed. In order to be eligible, you have to be a reasonably solid company with a specific project," he told Reuters on condition of anonymity.

Industry body the Society of Motor Manufacturers and Traders (SMMT) declined to comment while it awaited feedback from the meeting.

The 27 million pounds of government support to Jaguar Land Rover is for the production of a new vehicle which the government claimed would be more environmentally friendly than the traditional Land Rover.

It said Jaguar Land Rover, owned by India's Tata Motors, is looking to invest 400 million pounds into the project and the added government support would help safeguard jobs.

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